The New Startup Saviors
Few Investors who made their maiden investment in Indian start-ups when things started rolling from bad to worse, that is , after October last year
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The clamour about the void created in the venture funding market in India after its poster boys Tiger Global and SoftBank, and a couple of "big' venture capitalists (VCs) following them in herd (because of the fear of missing out on a big idea), backed out of from being part of the great Indian start-up story is loud and clear. The story that once was glorified and pushed to flamboyancy with the promise of fast-growth and spectacular returns was nullified at the end as that promise turned bit hollow. The void, however, is fortunately less resounding. Thanks to a new set of braveheart foreign VCs (largely US-based) who observed the madness in the market with top-view and placed their bets when the dust started to settle down, on the ones that seemed sturdy.
Entrepreneur picks few of them who made their maiden investment in Indian start-ups when things started rolling from bad to worse, that is, after October last year.
Plug and play tech center
Plug and Play Tech Center is perhaps the most active VC in Silicon Valley backing over 100 start-ups every year and has to its credit successful exits from companies like PayPal, Dropbox, and Lending Club. That's not the end. It is arguably the largest accelerator in the world for start-ups running around 12 industry-specific accelerator programs with nearly 400 start-ups operating from its large office-cum-co-working space. This is waymore than double the capacity (around 150 start-ups) of India's largest startup incubator, T-Hub.
Though more than 50 of its 550 portfolio companies have Indian founders but ShoppinPal, Pune-based mobile commerce platform for retail stores is the first Indian start-up backed by Plug and Play Tech Center. ShoppinPal raised $1.07 from Plug and Play Tech Center and Steelhead Ventures, another USbased micro venture capital firm in July 2016.
"Our mission is to empower start-ups with resources through our network and help corporations by connecting them to innovation at start-ups without any geographical limitations. So if we see any good start-ups from India which we can help, we will be happy to do," says Alireza Masrour, Managing Partner, Plug & Play Ventures – the investment arm of Plug and Play Tech Center. The fund usually co-invests with other VCs and angels in Silicon Valley anywhere from $25k to $500K from idea till Series A level. However it doesn't have a dedicated amount and team allocated to Indian start-ups.
Launched in 2015, Idein Ventures based in Ras al-Khaimah (one ofthe seven emirates), United Arab Emirates is essentially a private equity firm that made its maiden Indian investment worth $160k in January this year in Bengaluru-based Infurnia, a virtual reality start-up for furniture market followed by another $160k round in tutoring platform Qriyo Infolabs in the same month. The fund invests in UAE, West Africa, the US and now India. Idein Ventures has been studying the Indian market for last two- three years before it decided 2016 to be the year for its foray intothe world's third largest start-up ecosystem.
"We thought of entering the market in 2015 when there was an influx of investors but we realized that it wasn't the righttime for us to enter too. It seemed there were more investors than start-ups. Theopportunity in India remains huge. This is what we expectedbefore entering India rather than worrying about few start-up failures as that never mattered to us. The investors' attitude to jump in with everybody with the fear of missing out on a big idea is wrong because you tend to make wrong decisionsin haste," says Ashwin Srivastava, Co-founder and Director, Idein Ventures.
The fund will invest $200k-500k in seed stage start-ups to get strongly involved with the team and businessmodel. In the coming quarter of 2016, Idein Ventures is looking to back four start-ups in India.
Transmedia Capital is among the most successful early stage funds in Silicon Valley. Started in 2010, it has successfully exited from around 11 companies acquired by technology majors like Twitter, LinkedIn, Airbnb, and Snapchat. More so, around 90 percent of its total portfolio companies have been able to raise successive rounds of funding. As the name goes, the fund primarilycaters to digital media
businesses. In 2015, it backed video entertainment content aggregator Tappp and in April this year it co-invested in Dil Mil, dating app for South Asian expatriates along with other investors including Nelstone
Ventures, Maiden Lane Ventures and a couple of angel investors as well.
"We see a tremendousopportunity in India, realizing that the market will take some time to evolve. Access to connectivity and smart phone penetration is increasing dramatically, so the ability to reach a wider percentage of the population is becoming more realistic. With that said, credit card penetration is very low, so online transactions are more difficult at the moment, hence we are in pursuit of alternative solutions," says Chris Redlitz, General Partner, Transmedia Capital.
The fund deliberatelypaused deal making in India after 2015 when funding and valuation frenzy went out of control. However it says that its investments are independent of any such financial climate in the ecosystem. "While we have taken our time to become more educated about the market in India and Southeast Asia but we are not concerned about investment climate or valuation trends. Some of our best investments have been during difficult market conditions," states Redlitz.
Indian entrepreneur and VC community caught New York-based growth stage VC Stripes Group's eye when it led one of 2016's biggest start-up funding deals in its maiden investment in India. The fund that invests between $10-100m, typically in Series C and beyond stages of funding, made a big but safe bet when it put $82 million in online ticketing platform BookMyShow in July this year along with its existing investors including Network 18, Accel Partners and SAIF Partners.
Founded in 2007 by Ashish Hemrajani, Rajesh Balpandeand Parikshit Dar, BookMyShow has of late expanded internationally to New Zealand, Bangladesh, Indonesia, and UAE.
"With a ubiquitous and trusted brand, and history of capital efficient growth, BookMyShow is truly a standoutstory. Already the clear leader in movie and live event ticketing, BookMyShow is uniquely positioned to tap into India's digital advertising and entertainment markets, which are among the fastest growing globally," said Dan Marriott at the time of investing in BookMyShow.
Marriott co-founded the fund in 2008 along with Ken Fox. It raised its third fund, SG Growth Partners III in September 2014 with a total corpus of $500 million and currently manages assets worth around $1.2 billion.Stripes Group invests in Internet, digital media, software, and branded consumer products and has so far backed around 30 startups globally.
(This article first appeared in the Indian edition of Entrepreneur magazine (September 2016 Issue)